New “ecological transformation” of the Arkhangelsk PPM

24 march 2021
One of the main trends in the development of timber industry enterprises today is the environmental friendliness of production. Over the past 10 years, APPM has directed about 15 billion rubles for environmental solutions and implementation of the best available technologies. Vladimir Krupchak, a member of the Board of Directors of Arkhangelsk PPM, Investment Director at Pulp Mill Holding, told “Expert” how the environmental program works in the company and about the situation at the enterprise as a whole.

— How has the COVID-19 pandemic affected the work of the Arkhangelsk PPM?

— In 2020, APPM and its subsidiaries retained markets, increased capacity utilization and growth.

All companies of Pulp Mill Holding Group are continuous cycle enterprises. They not only worked as usual, but also continued to implement absolutely all investment programs adopted by the board of directors. But, of course, with strict adherence to all security measures.

In 2020, APPM opened a new Valmet evaporation plant, completing the priority investment project “Reconstruction of the Cardboard Production” worth 18.8 billion rubles.

Our corrugated packaging division Arkhbum JSC also realized its investment package of 6.8 billion rubles: the Podolsk branch modernized the corrugator and launched two BOBST processing lines, the Istra branch completed the construction of the second production building Istra-2, put into operation the second BHS corrugator and also two processing lines, the Voronezh site completed full modernization and reached the planned capacity. Finally, a new branch in Ulyanovsk — a corrugated board packaging production plant with a capacity of 192 million m2 per year — received the status of a particularly significant regional investment project. Its launch is scheduled for April 2021.

We made a qualitative step in business development — we moved to the B&C sector: launched the first production line of the sanitary tissue plant “Arkhbum Tissue Group LLC” in the Kaluga region. This is the largest investment project of APPM for the development of deep processing of its own products — high-quality pulp — worth 11.5 billion rubles. And we have already signed a contract for the construction of the second and third lines. The capacity of Arkhbum Tissue Group will increase to 210 thousand tons/year. The total cost of the project for the construction of the second and third lines is estimated at more than 16 billion rubles.

— With what results did APPM come to 2021?

— The company ended the year with good financial and operational results. About 90 % of our revenues came from containerboard and pulp sales.

The mill cooked more than 990 thousand tons of pulp for that year. This year, there will be 1012.4 thousand tons of pulp cooked. Arkhangelsk PPM will become one of the “million-plus” companies.

— Pulp Mill Holding is carrying out an active investment policy. What are the future plans of the company?

— Pulp Mill Holding intends to invest over 100 billion rubles in production.

The main pool of new projects will be implemented at APPM. This is primarily includes gasification. The main goal of the project is to decommission outdated boiler equipment and improve the environmental situation. The project is scheduled for completion in 2029. Capital expenditures will amount to 5.7 billion rubles.

We are preparing for the construction of a new sulphate-cardboard plant that meets all world requirements with infrastructure in place of the first line of production, which was closed in the 1990s. The capacity of the third cardboard machine will be 700 thousand tons. Our new project, for now, let’s call it “Big Arkhangelsk”, will give Novodvinsk and the Arkhangelsk region new jobs and additional taxes. 86.5 billion rubles will be invested in the new plant.

Finally, the mill plans to modernize its pulp production at a cost of 26.8 billion rubles. The annual capacity of the third line of production of APPM will increase by 70–80 thousand tons of pulp. A fundamental modernization will be carried out: replacement of the decker, auxiliary equipment, etc.

We are seriously considering launching the production of fluff pulp, which is not produced in Russia. The market for fluff pulp, which is a raw material for the production of hygienic non-woven materials, is characterized by a limited number of players — no more than 25 plants in the world. By implementing this project, APPM will become the only manufacturer in Russia, expand the possibilities of processing its own raw materials to products with high added value, and globally — will solve the issue of import substitution. APPM could continue to develop as a supplier of pulp, but today the maximum realization of possible synergy within the holding is what’s required.

— APPM is the leader in the containerboard market. Are you planning to stay in the B&B niche further?

— Amid an increase in the consumption of recycled materials, Pulp Mill Holding has taken the path of expansion in the segment of finished packaging. We have started construction of a recycled cardboard plant “ARKHBUM LINER” in the Moscow region with a capacity of over 500 thousand tons per year. The plant will produce testliner (recycled paper for flat layers of corrugated board) and fluting (recycled paper for corrugating), which will be sold both to the own corrugated products facility, “Arkhbum JSC”, and to all existing consumers of these products. It is extremely beneficial to increase the collection rate of recycled material for several reasons. Among the main ones are the creation of a regulated collection market, a decrease in the cost of products, the preservation of social stability, an increase in tax revenues and an environmental aspect.

As for containerboard, we have also entered the B&C sector: a new plant for the production of consumer packaging “ARKHBUM UPAK” has already been launched in the Moscow region. While moving away from plastic packaging, Pulp Mill Holding offers an environmentally friendly alternative — paper bags.

The holding is growing, developing, we are responding to market demands, introducing a new type of raw material — recycled pulp, doing it in a modern and high quality manner, thereby increasing the overall economic efficiency of the entire group, diversifying products, solving problems of in-depth processing of our own raw materials and import substitution. But at the same time, we ensure the synergy of the holding’s enterprises, which will allow us to respond to all the challenges of the time, while remaining highly competitive.

— With the growth of production, the company intends to significantly reduce the negative impact on the environment. Tell us about the use of the best available technologies (BAT) at APPM.

— The BAT list provides for both the presence of an environmental management system and the implementation of large-scale modernization projects. An integrated management system has been created and is functioning at the mill, which includes, among other things, an environmental management system. From the point of view of the state of the ecological and technological structure of production, APPM has carried out a professional assessment of its current impact on the environment. A decision has already been made to introduce the Environmental Efficiency Improvement Program, which has already been submitted for approval to the Ministry of Industry and Trade.

The implementation of all measures of the Program will lead to a new “environmental transformation” of APPM by 2030. The mill plans to reduce the specific discharge of pollutants into the Severnaya Dvina River by 45–55 %.

The Program includes more than 20 environmental protection measures. Preliminary financing costs amount to 18.2 billion rubles.

According to 2020 numbers, the mill invested 1.1 billion rubles in environmental protection measures based on the BAT principles. There was a significant decrease in emissions of methyl mercaptan and hydrogen sulfide: in relation to 2016 — by 49 % and 80 %, respectively.

Work will continue to reduce emissions of sulfur-containing compounds into the atmosphere, which are of greatest concern to residents of the nearest settlements of the Arkhangelsk region, which the mill plans to complete by 2023.

— What are the quantitative characteristics of the results of the implementation of the environmental solutions you listed? Are you managing to achieve your targets?

— A clear decoupling effect is recorded, which confirms a decrease in the burden on the environment with an increase in production productivity, which corresponds to the targets of APPM.

In particular, over the past 5 years with an increase in productivity, on average by 2021 there were recorded: a decrease in the intake of fresh (river) water from a water body by 8 %, a specific discharge of pollutants into a reservoir by 6 %, and specific emissions of pollutants into the atmospheric air — by 30 %.

Since 2015, the mill has carried out large-scale activities with a high degree of environmental efficiency. We switched to the production of the entire volume of bleached sulphate pulp using the ECF (Elemental Chlorine Free) technology.

— What measures does APPM take to obtain the complex ecological permit (CEP)?

— Preparation of an application for the complex ecological permit is in the final stage. We are planning to apply for it to the authorized state body this year. Unfortunately, the problem of applying methods for calculating emissions of pollutants into the air made our work difficult.

— For Russian export-oriented companies, the eco-standard is a matter of profitability and competitiveness in the global market. Especially considering that the EU is preparing to introduce a carbon tax on imports, including timber products. What is APPM doing in this direction?

— Ecology is an inevitability and necessity! APPM was the first in Russia to start purposefully investing in the ecological modernization of its production facilities 20 years ago. The idea was to reduce the formation of harmful emissions and discharges through a more complete and efficient use of resources (raw materials, chemicals, fuel and energy), instead of spending energy and money on cleaning and deactivating them. This is BAT. The “dual-use” project for the reconstruction of the cardboard production facilities in order to reduce fuel consumption was implemented in 1997–1998, with the use of the funds loaned from the World Bank. The experience proved to be successful — such investments have a double and sometimes triple effect. And now any new project is considered and evaluated in our country from an economic and environmental point of view.

Currently, APPM is the national leader of the international climate rating CDP (The Carbon Disclosure Project — an international project on disclosure of data on greenhouse gas emissions (hereinafter — GHG). According to the rating results, the mill has been assigned a high “A—” rating for the second year in a row. The results of the ratings are evaluated and used to take corrective action.

Also, the company annually monitors GHG emissions, accepts and fulfills voluntary commitments to reduce them. The APPM has implemented a GHG emission control system. During the last two years, practices aimed at involving business partners in solving climate problems have been introduced.

A joint project was implemented within the framework of Article 6 of the Kyoto Protocol, which included the modernization of two power boilers and the fuel supply system at CHP. This made it possible to more efficiently use bark waste and biological wastewater treatment sediment as fuel.

In 2003, at the 9th Conference of the Parties to the UN Framework Convention on Climate Change in Milan, Arkhangelsk PPM announced its first voluntary commitment to reduce GHG emissions while increasing productivity. The campaign is currently guided by the 2030 Low Carbon Strategy. The key goals of the modern Strategy are:

reduction of absolute GHG emissions by 55 % compared to 1990 down to 1.4 million tons of CO2-eq. with an expected cooking rate of 1 million tons per year,

verification and approval with the relevant Initiative Body of a scientifically grounded goal to reduce specific GHG emissions that meets the goals of the Paris Agreement — to reduce by 2030 the total direct and power generation-related indirect GHG emissions per 1 ton of manufactured products by 49 % compared to 2012 down to 1.4 СО2-eq/t.

To achieve the above goals, the company will take economically reasonable actions aimed at reducing the energy intensity of production; increasing the efficiency of utilization of all types of fuel when generating energy using own energy sources; increasing biomass share in the fuel balance; replacing fossil fuels with relatively higher specific GHG emissions with less carbon intensive fuels; decreasing methane emissions from waste disposal sites.

— According to Deputy Prime Minister, Victoria Abramchenko, the first carbon hub in Russia will be created in Sakhalin. An experiment on trading in emission quotas will be launched in the region. Is APPM ready for such air trade?

— One of the effective instruments for regulating the reduction of GHG emissions is precisely the mechanism of trading in quotas for these emissions. I’ll tell you even more: in 2002 we had a very successful attempt to trade such quotas — the company earned about 2 million euros. But for political reasons, globally, the issue of Russia’s entry into the international market for carbon quotas has stalled. So the creation of a pilot carbon hub will bring this issue to a practical level, which can only be welcomed.

— APPM is located in the onshore zone of the Arctic territory of Russia. What environmental decisions of the campaign are determined by this aspect?

— Here it is worth mentioning, first of all, about the implementation of “climate solutions”. The main source of emissions of soot and GHG particles into the air is CHP 1, — a plant that supplies energy to the production units of the Arkhangelsk PPM, as well as organizations and the population of the city of Novodvinsk. The priority goal for us is to change the fuel balance of the plant by replacing the use of coal with natural gas, as well as to increase the energy efficiency of the enterprise as a whole. To date, the fuel balance of the enterprise has already undergone significant changes to increase the share of using less carbon-intensive fuel. The share of biofuels used, according to the verified report on greenhouse gas emissions for 2019, was 43.5 %.

— Waste management issues are particularly sensitive in the country. How does Arkhangelsk PPM deal with these tasks?

— The mill is the owner and operating organization of three waste disposal facilities, which are included in the state register. Since 2016, the Company has eliminated the burial of the main heavy tonnage pulp and paper production waste (wastewater sludge and bark/wood waste); the largest share of the waste disposal balance is waste generated by combustion of coal, the main fuel used by the Company’s CHP 1. After the transition to natural gas, the formation and disposal of this waste will be excluded, the volume of waste disposal will be reduced by 85 % compared to the current period.

In 2019–2020 the state of the enterprise’s landfills was examined, after which the regulations for their operation were developed, containing, among other things, solutions regarding the monitoring of the technical condition and environmental impact of these facilities. The enterprise develops measures for the reclamation of landfills or the elimination of disposed waste.

— Integration of environmental, social and governance criteria and standards (ESG) into management is an important part of your work. Why is this done?

— Today, ESG indices are a measure of a company’s credit rating. The timber industry sector, especially the pulp and paper industry, are simply doomed to work by them: all of our projects are extremely capital-intensive. To count on investments, an enterprise must control GHG emissions, recycle waste, restore forests, not deplete natural resources, and so on.

There are now 17 positions in the UN Principles for Responsible Investment, nine of which relate to the environment. And without an environmental agenda, it is difficult for us to compete in the global market: APPM supplies products to environmentally sensitive European markets. An important indicator is also the issue of transparency, the legality of our resource base — wood supply, the fundamental basis of business, which requires new approaches to environmental management and serious investments. First of all — in order to restore the forests leased by the mill, which were transferred under the management of our general supplier of wood raw materials, Titan Group, which is more than 1.3 million hectares.

We have intensified our work with the supplier of raw materials in the direction of GHG monitoring: for the first time among Russian logging companies, Titan has carried out an inventory and quantification of direct and indirect GHG emissions in accordance with the requirements of the international standard GHG Protocol (Greenhouse Gas Protocol). According to the results of the study, GHG emissions from forest harvesting activities by enterprises in 2019 (163,548 t CO2-eq.) were fully compensated by GHG removals in the process of forest use (-216,700 t CO2-eq.).

In accordance with the adopted Climate Strategy, until 2030, Sawmill 25, a member of the Titan Group, will also continue to work on strategic planning and management of GHG emissions, assessment and management of climate risks and opportunities.

— One of the global principles of responsible investing is social development...

— Certainly. As well as the safety of workers, and working conditions, and investment in social projects, and support for education, etc. The company annually invests in social programs and projects in the territory of its presence over 350 million rubles. Our contribution to the development of the economy of the Arctic region is investments aimed at maintaining social infrastructure facilities in Novodvinsk that provide services for the entire population of the city. We finance the “Arkhangelsk PPM for Children Sports Development” programs (support of children sports clubs). Charitable assistance to social institutions and public organizations of Novodvinsk and the region amounted to about 70 million rubles at the end of 2020. For five years we have been supporting the project “4D: Social Dimension — Let’s Do Good Things”.

Without exaggeration, APPM has one of the best social programs for employees. There are more than 20 options for this program. Among them are rehabilitation treatment of employees, voluntary medical insurance, financing of expenses for recreation and health improvement of children, the purchase of travel vouchers for former employees, etc.
APPM makes significant investments in employee training, disease prevention, improvement of labor conditions and safety, and reduction of occupational risks.

Since 2016, APPM has been involved in co-financing the program “Provision of housing for young families”, within the framework of which financial assistance was provided for 60 families of employees.

In March 2020, Pulp Mill Holding adopted a program of assistance to regional medical and social institutions in all territories of its presence. It is being implemented to this day. Only APPM has created a whole system of assistance to healthcare and social sphere. More than 40 million rubles have already been allocated for the re-equipment of medical institutions, the purchase of medical equipment and means of protection against coronavirus, of which for the protection of workers (a wide range of preventive measures — 15 million rubles).

The mill invests in support of education: APPM actively cooperates with the Northern Arctic Federal University named after M. V. Lomonosov (NArFU), closely cooperates with the Novodvinsk industrial technical school, which trains specialists in working specialties for the mill.

APPM has developed a new HR strategy until 2030. One of its elements is the “education” of new employees from kindergarten. The project “The Future of the Arkhangelsk PPM” is ongoing, which popularizes blue-collar occupations, engineering and technical specialties, and forms human resources.

— The President instructed to develop a Federal Scientific and Technical Program in the field of environmental development of the Russian Federation and climate change for 2021–2030. Does APPM already have cases?

— The mill pays special attention to scientific research. One of the last significant ones is a joint investment project with Techservice LLC to reduce the negative impact on the environment by introducing a technology for extracting turpentine from by-product condensates generated during the production of pulp and focused on supplies to chemical industry enterprises, has already been approved by the commission of the Ministry for Development of Russian Far East and received the status of an Arctic Zone resident.

Pulp Mill Holding GmbH approved the initiative to create a complex of nurseries for growing planting material in the Arkhangelsk region, the first stage of which will be the creation of an APPM selection and seed center in Novodvinsk. NArFU will provide a scientific basis for the cultivation of planting material with improved hereditary properties using innovative technologies. Such research is extremely necessary before the introduction of developments in mass production, because the task is to grow 3 million seedlings at the first stage with the prospect of increasing them to 9 million per year.

— The Timber Industry Development Strategy until 2030 was recently adopted. How will this affect the work of the mill? In general, how can you evaluate the document, does the industry need it in the form in which it was adopted?

— The main directions of the strategy are aimed at extension of wood processing, its comprehensive use and import substitution of products that were not previously produced in the country. APPM with a group of subsidiaries has been building their strategy in this vein for several years already. Within the framework of our vertically integrated structure (VIS), we have achieved practically waste-free production: Titan Group supplies sawlog to Sawmill-25 CJSC, and pulpwood — to Arkhangelsk PPM. And the technological chips remaining from the production of sawn timber at the sawmill are also sent to the mill. At the same time, bark, flakes and substandard chips are supplied to the own boiler house of CJSC Sawmill 25, and shavings are used to produce pellets.

And using high-quality pulp for the production of containerboard and further along the chain — for the production of corrugated products and sanitary tissue products, APPM makes a significant contribution to the growth of exports of products with high added value, which means to an increase in industry GDP.

Thanks to the synergy of all business processes within the VIS, Arkhangelsk PPM has achieved the best results in terms of the volume of tax payments to the budgetary system of the Russian Federation per 1 cubic meter of timber harvesting.

APPM is counting on a set of preferential measures from the state specifically for such enterprises as we, working under the slogan: “We harvest timber responsibly, restore on time, process comprehensively along the chain, invest on a large scale.”